If investors are looking at the Small Cap Growth fund category, make sure to pass over Wasatch Micro Cap Fund (WMICX). WMICX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
WMICX is part of the Small Cap Growth category, and this segment boasts an array of many other possible options. Small Cap Growth mutual funds usually focus their portfolios on stocks with large growth opportunities and a market cap of under $2 billion. These portfolios tend to feature small companies in up-and-coming industries and markets.
History of Fund/Manager
Wasatch is responsible for WMICX, and the company is based out of Salt Lake City, UT. Wasatch Micro Cap Fund debuted in June of 1995. Since then, WMICX has accumulated assets of about $506.25 million, according to the most recently available information. The fund's current manager, Kenneth Korngiebel, has been in charge of the fund since July of 2017.
Performance
Of course, investors look for strong performance in funds. WMICX has a 5-year annualized total return of 5.76% and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 5.07%, which places it in the bottom third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 17.77%, the standard deviation of WMICX over the past three years is 24.6%. Looking at the past 5 years, the fund's standard deviation is 24.33% compared to the category average of 17.77%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. WMICX has a 5-year beta of 1.18, which means it is likely to be more volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. WMICX has generated a negative alpha over the past five years of -9.56, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is mostly on equities that are traded in the United States.
The mutual fund currently has 93.55% of its holdings in stocks, which have an average market capitalization of $1.53 billion. The fund has the heaviest exposure to the following market sectors:
- Technology
- Other
- Health
- Industrial Cyclical
- Finance
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, WMICX is a no load fund. It has an expense ratio of 1.66% compared to the category average of 1.06%. From a cost perspective, WMICX is actually more expensive than its peers.
Investors should also note that the minimum initial investment for the product is $2,000 and that each subsequent investment needs to be at $100
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Bottom Line
Overall, Wasatch Micro Cap Fund ( WMICX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and higher fees, this fund looks like a somewhat weak choice for investors right now.
This could just be the start of your research on WMICXin the Small Cap Growth category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
